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Nestle SA NESN

Rating as of

Morningstar’s Analysis

Valuation
Currency in CHF
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

Nestle’s Q3 Ahead Aided by Pet Care and Coffee With Fiscal 2020 Organic Growth Guidance Upgraded

Analyst Note

| Ioannis Pontikis, CFA |

Nestle reported a sales update for the nine months of fiscal 2020, with organic growth of 3.5% (real internal growth of 3.3%, pricing of 0.2%) ahead of company-compiled consensus estimates (2.3% real internal growth, 0.5% pricing). In the third quarter, growth continued to be supported by the retail channel due to elevated demand for at-home consumption with the out-of-home channels remaining significantly negative, though at a moderating pace versus the previous quarter. Notably, management upgraded growth guidance for fiscal 2020 to "around 3%" (versus 2%-3% previously, 2.5% in our model and 2.9% for company-compiled consensus). We plan to slightly increase our CHF 91 fair value estimate for Nestle to account for better third-quarter performance and higher fiscal 2020 organic growth guidance numbers. Although shares are expensive at current levels, we need to recognize Nestle's resilient performance throughout the coronavirus pandemic so far, which we think reflects the group's wide moat and a function of a diversified portfolio of brands, categories and sales channels that are still largely relevant and in line with consumer trends.

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Company Profile

Business Description

With a 150-year-plus history, Nestle is the largest food and beverage manufacturer in the world by sales, generating more than CHF 90 billion in annual revenue. Its diverse product portfolio includes brands such as Nestle, Nescafe, Perrier, Pure Life, and Purina. Nestle also owns just over 23% of French cosmetics firm L'Oreal. The company has a vast portfolio of global products, with 34 brands each achieving more than CHF 1 billion in sales annually and a geographic presence that spans 189 countries.

Contact
Avenue Nestle 55
Vevey, CH-1800, Switzerland
T +41 219242111
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings
Fiscal Year End Dec 31, 2020
Stock Type
Employees 291,000

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